HRM vs PM
Examine the contention that how managers manage their people resources/assets will be shaped by either a ‘conventional personnel’ or a ‘human resource management’ approach. What differences exist between these two approaches, and where does this lead to in the management of ‘people in organisations’? Draw upon service industry examples and literature to add weight to your analysis, discussion and conclusions. The management of people in organisations can take many shapes and forms and has evolved rapidly over time. This is due to the changing role of the manager within organisations..
There are two methods of people management which have existed and still do exist within organisations today which will be examined in this essay. These methods are Personnel Management (PM) and Human Resource Management (HRM). This essay will discuss the history of the two methods, the key features and the implications of the methods, by implementing them in key areas of a managers responsibilities and then applying them to an industry – which in this case will be the service sector. Before we discuss the two methods of management, it is best to first discuss why we manage human resources.
This is best described by Maund (2001): “… the role of Human Resources is to assist in the long term viability of a business or a non-profit making enterprise… While it is recognised that other resources are essential to the efficacy of an organisations business, for example finance and production, it is the human resources that remain virtually limitless in their capacity to make an impact – both positive and negative – on an organisation (Maund 2001. p. 17)”.
Agazadeh (2003) shows in this quote “Successful HR Managers and departments have a significant strategic impact on their organisations (Agazadeh.2003. p. 201) that he also believes that good human resource management is at the core of a successful organisation. Managing people well, especially within the service sector, means happier employees which in turn means happier customers who will return in the future ensuring the long term success of an organisation. This is especially important in the expanding and extremely competitive service sector. Welsh (2007) notes there are over 10 million people working in the service sector in the UK.
The tourism sector alone annually contributed 5% (45 billion) of the UK’s GDP (Gross Domestic Product) according to Boella (2001). With an industry of that size which is growing more every year, the importance of good management is becoming increasingly obvious within the sector to ensure its profitable future. Aside from the debate over the most affective way to manage within an organisation, the actual term to use for people management is now being argued too. One of the prompts for this is that over the last decade the ‘Personnel Departments’ within organisations are now being referred to as ‘Human Resource Departments.
Cole (2002) notes that the changed title of his latest edition ‘Personnel and Human Resource Management’ is another reflection of the ever increasing use of the term. Welsh (2007) also points out that when looking within the job advertisements in any medium the increasing occurrence of ‘Human Resource’ positions instead of ‘Personnel’. The term ‘Human Resource Management’ is in itself an American term for Personnel Management and is the term used by those considered management ‘gurus’ (Cole 2002. p. 8).. However the UK could be said as more apprehensive about adopting the term.
This was made apparent in July 2000 when the professional body for personnel management in the UK was given chartered status and did not change its name to ‘Human Resource’ but to the Chartered Institute of Personnel and Development according to Cole (2002). Many authors on the subject believe there is not a lot of significant difference between HRM and PM. According to Beardwell (2004), the argument between PM and HRM only exists between academics, and in practice, the two methods are extremely similar, most of the time indistinguishable. Storey (1992) notes that HRM is just another term for personnel . Cornelius (2001. p.9) also suggests that “…
HRM is little more than a relabelling of personnel management”. Although PM and HRM are seen as two of the same thing in theory, in practice they have their own background and their attributes reflect this. Personnel Management could be said to be the original people management method. It was most effectively used in the 1970’s and 1980’s when trade unions were at their strongest. Personnel Managers’ responsibilities were to keep the peace between management and trade unions. Their responsibilities lay more in avoiding strikes than in focussing on positive change for the benefit of the company (Kessler 1991).
Human Resource Management came about as a result of the weakening of Trade Unions in the 1980’s. This was due to globalisation and the changes in employment law under the Conservative government. Individuals were given more rights and no longer needed to be part of a union to exercise them. Cole (2002) discusses that after all the changes, personnel managers found themselves suddenly able to concentrate on working in harmony with their staff as opposed to before when they were constantly threatened with strikes.
Human Resource Management differs from Personnel Management on a number of issues. When making broad comparisons of the two one could call HR the ‘soft, intangible’ approach to management and PM the ‘hard, tangible’ approach (Rosenfeld 1999). This refers to approach and results of using HRM or PM to manage. The HRM soft and intangible approach can be compared to the PM hard and tangible approach by discussing their attitudes towards managing people and in specific areas of management. Storey (1992) shows that the HRM’s managerial role is to be ‘nurturing’.
This shows that HRM want to look after employees and help them in whatever way they can to achieve the best outcome for the employee and the business. PM’s managerial role is to ‘monitor’. This is suggesting that the manager is there to watch in a ‘big brother’ sense, which is less working with the employee and is also seemingly waiting for the employee to make a wrong move or slip up. This is in the interest of the business as poor effort and mistakes can cost a business time and money. However it also an attitude which is not encouraging working together.
Nurturing employees makes them feel wanted and part of a team therefore boosting their motivation. PM management is less about individual relationships between line-managers and employees and more about the legalistic contracts where the employees are there to do their job and the line managers are there to oversee or ‘monitor’ their work to make sure everybody is sticking to the rules. This would be a good time to show the two attitudes to managing by each method in practice within the service sector. The HRM attitude to management was described by Storey as ‘nurturing’.
To nurture is “to support and encourage, as during the period of training or development” (Dictionary. com 2007). Nurturing may not be a tangible benefit that an employee can hold in their hand like a bonus, but it is something which will make them feel more valued and therefore motivated to work well for their organisation. Organisations can take an HRM approach to managing by offering intangible benefits like these and receiving tangible benefits back in the form of increased profits through harder work by employees.
A strong example of this would be within a company who invests a lot of time and support in its employees and in turn has reaped the benefits from increased profits. Starbucks Coffee started off as a small coffee shop in Seattle, Washington State in the 1970’s. It now has over 12,000 shops worldwide (This Is Money 2006) and last year’s sales were $244. 2 million in the UK alone (This Is Money 2006). According to the companies founder Howard Shultz, “Our only sustainable competitive advantage is the quality of our workforce.
We’re building a national retail company by creating pride in – and providing a stake in – the outcome of our labour (Sandeland 1997. p. 136)”. The article details Starbucks’ comprehensive benefit and training package for their employees which includes health care, stock options, career counselling and product discounts. Schultz believes that without taking the time and effort to make sure employees are looked after, happy and being rewarded for their hard work, be it tangible or intangible, they will not feel “… financially or spiritually tied to their job” Sandeland. 1997.p. 136).
Starbucks has succeeded not just on the popularity of their coffee, but on the service customers receive by the employees – a direct result of the nurturing involved in an HRM approach to management. Starbucks Head of Human Resources best sums up their attitude in the comment “We are in the people-development business almost as much as the coffee business”. The PM ‘monitoring’ attitude to management sat well during the times of Trade Unions when a Personnel Managers main responsibility was to ensure workers were only doing what was set out in their contract terms.
There was no striving for improving customer relations through change as this could risk discontent and strikes by Unions. However as the Trade Union power weakened and the focus could turn to increased productivity through change and studies were carried out to find the best way to achieve maximum output from employees. The Hawthorne studies were carried out in the early 19th century by Sir Elton Mayo and were originally set up to discover what working conditions encouraged better production rates (Bloisi 2006).
Whilst carrying out the studies on a selected group of employees, the results showed that no matter what element of the work they changed, be it temperature or brightness in the room, the productivity always increased. This became known as the ‘Hawthorne Effect’. The study discovered a fundamental concept that would seem obvious today. They found that workplaces are social environments and within them, people are motivated by much more than economic self-interest. The employees worked harder because they knew they were being treated differently and were not being seen as workers but as individuals..
This became knows as the ‘someone upstairs cares’ principal (accel-team 2007). Another two differing approaches to management by HRM and PM is the way in which they deal with business goals. According to Cole (2002) PM focuses on how a business goal will affect employees before it is challenged, but HRM has a total commitment to business goals. Previously, restrictive Trade Unions meant business goals had to come second to keeping employees happy. Of course this all changed. The 1990’s became known as the ‘decade of the consumer’ which meant that employees concerns now came second to customer needs.
These attitudes light up another significant difference in the two methods, how they deal with change. PM will support change but unlike HRM it will not encourage it. Change is becoming increasing important for today’s businesses. Rosenfeld and Wilson (1999) note customer’s demand changes constantly and a business needs to adapt quickly if it is going to stay competitive. As mentioned previously by Boella (2001), the service sector is an ever growing industry which contributes hugely to the UK’s economy every year.
With over 10 million employees in the sector and the majority of them coming face to face with customers as part of their job, it is essential that they convey the best image possible of the organisation. As mentioned before, Mound (2001) describes the strongest resource an organisation has is its human resources and when managed well can have the largest impact on an organisations success. One company’s who takes great pride in their image by looking after their employees, is John Lewis.
